Smith Out, Subramaniam In As Head of FedEx

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Fred Smith, who started what became FedEx in the early 1970s and built it into a global shipping and logistics powerhouse, is stepping down as CEO effective June 1, to be replaced by groomed successor, president and COO Raj Subramaniam, with Smith staying on as executive chairman.

Subramaniam, a 30-year veteran of FedEx who headed up its marketing for five years and has a degree in that discipline, steps into the role at a particularly challenging time. The company’s recent performance and strategy has been questioned by many observers, and the performance of the other duopoly company, UPS, has been on an upward trend.

“Where is the innovation? Where is the plan to take share? From who?” asked Rick Watson, founder and CEO of RMW Commerce Consulting in a LinkedIn post about FedEx’s most recent quarterly call. “They are not taking share from Amazon, and UPS is simply executing and innovating faster – growing faster and getting more profitable at the same time. FedEx needs to be combined with another company at this point. I don’t see a lot of great options, except another transportation company.”

Subramaniam has largely been the face of the company in recent years. He leads quarterly analyst meetings and has played a key role in the company’s shift and scale-up into ecommerce shipping, including a focus on the SMB market. Subramaniam was viewed more seriously as the heir apparent after being named president and COO and added as a director in 2020.

“FedEx has changed the world by connecting people and possibilities for the last 50 years,” Smith said in a release. “As we look toward what’s next, I have a great sense of satisfaction that a leader of the caliber of Raj Subramaniam will take FedEx into a very successful future. In my role as Executive Chairman, I look forward to focusing on Board governance as well as issues of global importance, including sustainability, innovation, and public policy.”

Prior to being named president and COO, Subramaniam was president and CEO of FedEx Express for a brief period in 2019. Before that he was EVP of marketing and communications for nearly six years, and also headed up global marketing as SVP of FedEx Services for seven years.

“Fred is a visionary leader and a legend of the business world,” Subramaniam said in the release. “He founded one of the world’s greatest and most admired companies, and it is my honor and privilege to step into this role and build upon what he has created.”

Consultants in the logistics and shipping don’t expect any major changes with the transfer of power, especially with Smith remaining as executive chairman and Subramaniam having been effectively leading the company. Smith’s son, Richard Smith, was recently named regional president of the U.S. and EVP of global support at FedEx Express.

“I think this is more of a title change than a shift in leadership, at least in the short term,” said Nate Skiver, founder of LPF Spend Management. “Fred Smith has not been publicly leading FedEx for a while, instead relying on senior leaders to do so, namely Raj. Also, the vacant role of COO is not going to be backfilled, according to FedEx. So, what really changes?”

Skiver said he agreed with other observers that “status quo” might not be good enough given FedEx’s recent performance, the various logistical headwinds here and abroad, and fierce competition.

“FedEx continues to struggle with Ground profitability and service performance, while attempting to expand its network,” Skiver said. “And they also continue to kick the can down the road when pressed about how they’re going to address these challenges and turn the corner, hardly providing any supporting facts. Raj has become very good at that, and I don’t expect that to change, regardless of his title.”

While some experts wonder if it makes sense for FedEx to merge its operating units – Ground, Express and Freight – to gain efficiencies of scale and more closely reflect UPS, others were dubious.

“Having separate operating companies helps keep FedEx classified differently from UPS from a labor perspective,” said Josh Taylor, Senior Director of Professional Services at parcel consultancy Shipware who worked in revenue management and strategy at UPS. “It’s currently practically impossible to unionize FedEx drivers and package handlers at a large scale, and that could easily change if they restructured to look more like UPS.”